German economic growth halved in 2008

By GEIR MOULSON, The Associated Press
| 5:14 a.m.Jan. 14, 2009

During a news conference in Berlin, from left, Christian Social Union Party chairman Horst Seehofer, Vice Chancellor and Foreign Minister Frank-Walter Steinmeier and German Chancellor Angela Merkel, and Peter Ehrlich, on Tuesday, Jan. 13, 2009, after the German coalition government agreed on a multibillion-euro economic stimulus package to help the country out of recession.(AP Photo/Markus Schreiber)
— AP

During a news conference in Berlin, from left, Christian Social Union Party chairman Horst Seehofer, Vice Chancellor and Foreign Minister Frank-Walter Steinmeier and German Chancellor Angela Merkel, and Peter Ehrlich, on Tuesday, Jan. 13, 2009, after the German coalition government agreed on a multibillion-euro economic stimulus package to help the country out of recession.(AP Photo/Markus Schreiber)
/ AP

BERLIN 
The German economy grew by 1.3 percent in 2008, only about half the previous year's rate as the global financial crisis took its toll on exports, preliminary government figures showed Wednesday.

Europe's biggest economy grew 2.5 percent in 2007 and 3 percent in 2006. It managed healthy growth of 1.4 percent in last year's first quarter, but then started shrinking and went into recession in the third quarter as the financial turmoil intensified.

The Federal Statistical Office offered a rough preliminary estimate that the economy shrank by between 1.5 and 2 percent in the fourth quarter, but it is not due to release official figures until Feb. 13.

"Economic growth in 2008 was solely based on domestic demand," the office said in a statement.

It said net exports, which had powered Germany's relatively strong economic performance in previous years, weighed down last year's growth – making a negative contribution of 0.3 percentage points to gross domestic product.

Exports grew on 3.9 percent in 2008, down from the previous year's 7.5 percent, while growth in imports was up to 5.2 percent from 5 percent, the statistical office said.

Data released last week showed exports plummeted by 10.6 in November from the previous month – the sharpest monthly drop since German reunification in 1990.

Alexander Koch, an economist at UniCredit in Munich, said he expected another "ugly" quarterly economic contraction in this year's first quarter.

"All in all, we expect real GDP to contract by about 2 1/2 percent this year," he said. "This would be the worst growth performance since World War II."

The German economy last saw a full-year decline in 2003, when it contracted by 0.2 percent.

Wednesday's figures showed that Germany ran a small budget deficit, 0.1 percent of GDP, last year.

In an effort to help the economy weather the global crisis, Chancellor Angela Merkel's governing coalition this week agreed on a new euro50 billion ($67 billion) stimulus plan that includes investments in infrastructure, as well as tax relief, reductions in health care contributions and bonuses for families with children.

That comes on top of an earlier plan worth euro23 billion, which was criticized at home and abroad as too cautious.

"We took care to choose the right moment," Merkel told parliament on Wednesday as she presented the new package to lawmakers. "We deliberately did not get involved in trying to outdo each other at the European level."

"We truly do not need to take fright at comparison with other countries' initiatives," she said. It is not yet clear when lawmakers will vote on the package.

The leader of the biggest opposition party, Guido Westerwelle, derided the plan as ineffective.

"In reality, this is not the biggest economic stimulus package in our country's history," said Westerwelle, of the pro-business Free Democrats. "So far, it is nothing but the biggest package of debt in our country's history."